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​March 18, 2014, Hong Kong — CBRE has unveiled the results of its Asia Pacific Investor Intentions Survey 2014, which gauges the appetite and outlook of Asia Pacific real estate investors for the rest of the year. A significant majority of investors expect to commit more capital to the Asia Pacific real estate market in 2014 compared to 2013.

Total real estate investment turnover in Asia Pacific for 2013 reached US$90.4 billion, a rise of 24% year-on-year and the highest figure recorded since CBRE began collecting data in 2005. Despite the record total reached last year, and various concerns ranging from high pricing to slower economic growth, a majority of respondents indicated that they will continue to commit more capital to the Asia Pacific real estate market, with 64% expecting their purchasing activity to be higher than in 2013.

Investors were not without concerns, however. Respondents identified economic slowdown or weakness as the biggest concern around property investing in 2014 (23%), along with the perception that property has become overpriced (21%) and the effects of US tapering and rising interest rates (17%).

“Despite some obstacles and threats, investors generally retained a positive outlook towards the Asia Pacific region’s longer term prospects. Investors are not just planning to commit more capital to the region, they are looking to commit substantially more. The attractiveness of Asia Pacific as a region persists as a result of economic growth levels that remain higher than global averages, long-term demand for quality commercial property and rapid urbanization,” said Mr. Greg Penn, Managing Director, Capital Markets Asia for CBRE.

Breakdown of Market Interest

Asia retained a lot of appeal for investors, with Emerging Asia and Developed Asia topping the list of preferred regions to invest in globally, and with 23% of investors saying they targeted each. There was also strong interest in investing in North America and Western Europe as the recovery in the West takes hold, with 20% and 16% of investors interested in these markets, respectively.

The office sector was identified as the most popular sector for investment (32%) followed by industrial and logistics (29%) and residential (21%). The strong interest in industrial and logistics assets is driven by the comparatively better yields in the sector and strong demand for modern logistic facilities across the region. However, there are ongoing challenges around sourcing investable assets and land acquisitions. The interest in residential assets is supported by the continuing wave of urbanization in the region. Meanwhile, interest in retail assets cooled somewhat from previous years in part because of the challenges of sourcing investable assets, and pricing.

Within Asia Pacific, China is the preferred destination for cross-border investors—excluding respondents selecting their own market of domicile—followed by Australia and Japan. Meanwhile, Australia industrial and logistics, Australia offices, China industrial and logistics, Japan offices and Australia retail were identified as the most attractive country-sectors for investment.

Which country in Asia Pacific is the most attractive for property investment in 2014?

In Hong Kong, investment appetite from cross-border investors appeared weak, as they continued to be impacted by double stamp duty measures and persistent high pricing. “Although some vendors have softened their stance on asking prices, there is limited pressure for further price cuts given the current low interest rate levels. As such, Hong Kong is quickly losing its attraction to international investors as reflected in the survey. Investors are chasing assets or markets that offer higher return or are in the upward cycle elsewhere in the region, such as China and Japan,” explained Ms. Ada Choi, Director of CBRE Research Asia. “There remains a considerable level of interests from occupiers and institutions (e.g. insurance) from mainland China who still have strong desire to put their flags in Hong Kong.”

The survey also revealed a number of other interesting trends, including:

Respondents continued displaying a strong preference towards investing in gateway cities such as Sydney, Tokyo and Shanghai

Investors are polarized at both ends of the risk curve; some indicated that opportunistic/value-added is their preferred asset type; others are looking at prime/core whilst relatively fewer opted for secondary assets

Investor appetite for secondary assets is increasing, however, as buyers are deterred by the aggressive pricingfor prime/core assets and look to capitalize on the pricing gap between core and secondary locations

The CBRE Asia Pacific Investor Intentions Survey 2014 was carried out online between January-February 2014 and covered a wide range of real estate investors, in particular including fund or asset managers, but also others including private equity firms, banks, insurers, private property companies and REITs. Respondents were primarily comprised of Asia Pacific-domiciled investors, but global investors headquartered elsewhere, but with the ability to invest in Asia Pacific, were also included.

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Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.